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How Immigrants Create More Jobs

IN the campaign season now drawing to a close, immigration and globalization have often been described as economic threats. The truth, however, is more complex.

Over all, it turns out that the continuing arrival of immigrants to American shores is encouraging business activity here, thereby producing more jobs, according to a new study. Its authors argue that the easier it is to find cheap immigrant labor at home, the less likely that production will relocate offshore.

The study, “Immigration, Offshoring and American Jobs,” was written by two economics professors — Gianmarco I. P. Ottaviano of Bocconi University in Italy and Giovanni Peri of the University of California, Davis — along with Greg C. Wright, a Ph.D. candidate at Davis.

The study notes that when companies move production offshore, they pull away not only low-wage jobs but also many related jobs, which can include high-skilled managers, tech repairmen and others. But hiring immigrants even for low-wage jobs helps keep many kinds of jobs in the United States, the authors say. In fact, when immigration is rising as a share of employment in an economic sector, offshoring tends to be falling, and vice versa, the study found.

In other words, immigrants may be competing more with offshored workers than with other laborers in America.

American economic sectors with much exposure to immigration fared better in employment growth than more insulated sectors, even for low-skilled labor, the authors found. It’s hard to prove cause and effect in these studies, or to measure all relevant variables precisely, but at the very least, the evidence in this study doesn’t offer much support for the popular bias against immigration, and globalization more generally.

We see the job-creating benefits of trade and immigration every day, even if we don’t always recognize them. As other papers by Professor Peri have shown, low-skilled immigrants usually fill gaps in American labor markets and generally enhance domestic business prospects rather than destroy jobs; this occurs because of an important phenomenon, the presence of what are known as “complementary” workers, namely those who add value to the work of others. An immigrant will often take a job as a construction worker, a drywall installer or a taxi driver, for example, while a native-born worker may end up being promoted to supervisor. And as immigrants succeed here, they help the United States develop strong business and social networks with the rest of the world, making it easier for us to do business with India, Brazil and most other countries, again creating more jobs.

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David G. Klein

For all the talk of the dangers of offshoring, there is a related trend that we might call in-shoring. Dell or Apple computers may be assembled overseas, for example, but those products aid many American businesses at home and allow them to expand here. A cheap call center in India can encourage a company to open up more branches to sell its products in the United States.

Those are further examples of how some laborers can complement others; it’s not all about one group of people taking jobs from another. Job creation and destruction are so intertwined that, over all, the authors find no statistically verifiable connection between offshoring and net creation of American jobs.

We’re all worried about unemployment, but the problem is usually rooted in macroeconomic conditions, not in immigration or offshoring. (According to a Pew study, the number of illegal immigrants from the Caribbean and Latin America fell 22 percent from 2007 to 2009; their departure has not had much effect on the weak United States job market.) Remember, too, that each immigrant consumes products sold here, therefore also helping to create jobs.

When it comes to immigration, positive-sum thinking is too often absent in public discourse these days. Debates on immigration and labor markets reflect some common human cognitive failings — namely, that we are quicker to vilify groups of different “others” than we are to blame impersonal forces.

Consider the fears that foreign competition, offshoring and immigration have destroyed large numbers of American jobs. In reality, more workers have probably been displaced by machines — as happens every time computer software eliminates a task formerly performed by a clerical worker. Yet we know that machines and computers do the economy far more good than harm and that they create more jobs than they destroy.

Nonetheless, we find it hard to transfer this attitude to our dealings with immigrants, no matter how logically similar “cost-saving machines” and “cost-saving foreign labor” may be in their economic effects. Similarly, tariffs or other protectionist measures aimed at foreign nations have a certain populist appeal, even though their economic effects may be roughly the same as those caused by a natural disaster that closes shipping lanes or chokes off a domestic harbor.

AS a nation, we spend far too much time and energy worrying about foreigners. We also end up with more combative international relations with our economic partners, like Mexico and China, than reason can justify. In turn, they are more economically suspicious of us than they ought to be, which cements a negative dynamic into place.

The current skepticism has deadlocked prospects for immigration reform, even though no one is particularly happy with the status quo. Against that trend, we should be looking to immigration as a creative force in our economic favor. Allowing in more immigrants, skilled and unskilled, wouldn’t just create jobs. It could increase tax revenue, help finance Social Security, bring new home buyers and improve the business environment.

The world economy will most likely grow more open, and we should be prepared to compete. That means recognizing the benefits — including the employment benefits — that immigrants bring to this country.

Tyler Cowen is a professor of economics at George Mason University.

A version of this article appears in print on October 31, 2010, on page BU6 of the New York edition with the headline: How Immigrants Create More Jobs. Order Reprints|Today's Paper|Subscribe